2022-09-14
Finally! the government is taking the required measures against small credit apps.
Before starting let me first introduce my readers to the situation (Even if you are not from India this might be good case study):
It all started just few years ago when all of a sudden few loan apps started to emerge on app/play store. What these companies were doing is providing small loan to its users by taking only minimal documents. These apps performed on 2-1-0 formula - two minutes to decide, one minute to transfer and no human contact and zero collateral.
Because of this, these apps became a massive success among individuals - no need to open your bank app or take the risk of affecting your credit score in case of failed repayment of loan. Even though Indian banking system is good - according to World Bank's estimates 78% of Indian adults have a bank account. However, Indian banks currently don't have any expertise in providing micro loan. This is exactly the need what these small credit apps are trying to fill.
Because of being a new kid in the street, these apps performed in their own unregulated bubble. No one was there to judge their way of working. On the one side these apps fulfilled the need of Indian people by giving them easy access to credit but on the other hand these companies charged exorbitant interest rates and used inhumane tactics to recover their loan (There have been instances where people have committed suicide as a result of threats they received from the recollection team of these apps).
After much talk of more than two years government is finally giving some essential orders - Government has now ordered Reserve Bank of India to create a whitelist of legal apps which will be the only ones app/play store can host.
This seems to be a necessary step. Moreover, the demand of micro credit by Indians must be taken under consideration and adequate changes must be implemented in Indian banking system. The changes which can create ease of taking micro credit and educating the gullible citizens.